Ex Nihilo Dutluk: Reciprocal Method: This method is also known as algebraic method. The reciprocal allocation method allocates costs by explicitly including the mutual services provided among all support departments. Theoretically, the direct method and the step-down method are less accurate when support departments provide services to one another reciprocally. Implementing the reciprocal allocation method requires three steps. Step 1 Express support department costs and reciprocal relationships in linear equation form. Step 2 Solve the set of simultaneous equations to obtain the complete reciprocated costs of each support department. Step 3 Allocate the complete reciprocated costs of each support department to all other departments (both support and operating departments) on the basis of the usage proportions (based on total units of service provided to all departments).

Reciprocal Method: This method is also known as algebraic method. The reciprocal allocation method allocates costs by explicitly including the mutual services provided among all support departments. Theoretically, the direct method and the step-down method are less accurate when support departments provide services to one another reciprocally. Implementing the reciprocal allocation method requires three steps. Step 1 Express support department costs and reciprocal relationships in linear equation form. Step 2 Solve the set of simultaneous equations to obtain the complete reciprocated costs of each support department. Step 3 Allocate the complete reciprocated costs of each support department to all other departments (both support and operating departments) on the basis of the usage proportions (based on total units of service provided to all departments).

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Cost and Management Accounting Halil Cem Sayın

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Ex Nihilo Dutluk